Israeli Prime Minister Benjamin Netanyahu has signed a coalition deal with rival parties to form the next government.

An agreement had been stalled for weeks due to tough negotiations.

The new coalition is the first in a decade to exclude ultra-Orthodox Jewish parties.

It includes two new rising stars who have vowed to end a system of draft exemptions and welfare subsidies granted to thousands of ultra-Orthodox students.

A spokeswoman for Mr Netanyahu's Likud-Yisrael Beitenu party said leaders of the Yesh Atid and Jewish Home parties struck the deal after agreeing to give up last-minute demands to be named deputy prime ministers shortly before the beginning of the Jewish Sabbath.

Those demands delayed the deal from being formalised at the last moment the night before.

Mr Netanyahu welcomed the agreement in a statement.

"We will work together in the new government for the sake of Israel's citizens. We will act to strengthen Israel's security and to improve the quality of life for the citizens of Israel," he said.

The next step is for Mr Netanyahu to notify President Shimon Peres on Saturday night.

The new Israeli government will be sworn by Monday, two days before President Barack Obama is due to visit Israel.

Talks were stuck for weeks over the division of Cabinet portfolios and reforms in the military draft law.